KEY TAKEAWAYS
- The International Monetary Fund expects China’s GDP to increase by 5% in 2024 and by 4.6% in 2025, up 0.4 percentage points each from its previous forecast in April.
- The fund also said the risks from the property sector downturn were “tilted to the downside.”
- However, it warned China’s government of the perils of its industrial policy, including backing “priority sectors.”
The International Monetary Fund (IMF) has raised its forecast for China’s growth for 2024 and 2025, citing strong first-quarter GDP and stimulus measures by Beijing.
The fund said it now expects GDP in the world’s second-largest economy to increase by 5% in 2024 and by 4.5% in 2025, up 0.4 percentage points each from its previous forecast.
It also said the risks from the property sector downturn were “tilted to the downside.”
IMF’s Gopinath Notes China’s Support of ‘Priority Sectors’
IMF First Deputy Managing Director Gita Gopinath said, however, that the fund expects China’s economy to slow to 3.3% growth by 2029 due to aging and slower productivity growth, and warned that China’s “use of industrial policies to support priority sectors” could lead “to a misallocation of domestic resources and potentially affect trading partners.”
Treasury Secretary Yellen Has Highlighted China Dumping Concerns
U.S. Treasury Secretary Janet Yellen highlighted concerns about the global economic fallout from China’s excess manufacturing capacity when she visited China in April. Earlier this month, the Biden Administration raised tariffs on a slew of Chinese imports, including electric vehicles and semiconductors.
Meanwhile, China has been trying to breathe back life into its housing market. Earlier this month, China introduced its strongest measures to date to address its troubled property market, easing mortgage regulations and encouraging city and local authorities to purchase unsold homes to be converted into affordable housing.